Financiers set to approve billions for Roy Hill project

A decision on loans for Gina Rinehart’s Roy Hill joint venture tops the agenda for Thursday’s meeting of the board of the Export Import Bank of the United States.
Photo: Bloomberg

by
Peter Ker

Gina Rinehart’s Roy Hill joint venture faces a pivotal 48 hours, with export credit agencies in the United States and Korea about to approve billions in loans to the massive iron ore project.

The Roy Hill decision tops the agenda for Thursday meeting of the board of the Export Import Bank of the United States, which has indicated preliminary support for $US694 million ($779 million) in finance for Roy Hill.

There have also been unconfirmed reports from Asia that the Korean Exim Bank has approved $US1 billion in finance, with final decisions from similar agencies in Japan expected in days.

Roy Hill is likely to cost $US10 billion. It is a joint venture between Ms Rinehart’s Hancock Prospecting, Korean steel giant POSCO, Japan’s Marubeni and China Steel Corporation. Despite new Asian speculation the project may cost more, the partners still expect to raise nearly $US7 billion for the mine, port and rail project, with $US4 billion from export credit agencies, and nearly $US3 billion from commercial banks like ANZ and NAB.

A spokeswoman for the US Exim Bank told Fairfax Media Thursday’s meeting would involve the ‘‘final vote’’ on whether to fund Roy Hill, which has been open for review by US Congress over the past month.

The spokeswoman said the bank had received ‘‘a number of communications from Members of Congress’’ on the Roy Hill decision earlier this year, and had spent the past month taking further comment.

It was reported earlier this year American iron ore miners were unhappy with the prospect of a foreign iron ore producer getting help from American taxpayers. Those concerns were contested by representatives of states like Wisconsin, where significant numbers of Caterpillar employees live.

Caterpillar plans to supply trucks to Roy Hill, just as it has already done for Fortescue in the Pilbara.

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Approval of the Roy Hill deal would add to the $US4.69 billion worth of exposure the US Exim Bank already has to Australian projects, with at least two of the big Gladstone LNG projects previously winning funding.

Virgin Australia has also won funding in the past, on the grounds that it purchased aircraft from US manufacturer Boeing.

According to its recent annual report, the US Exim authorised $US298.3 million worth of loans, guarantees and insurance to Australian projects in fiscal 2013.

While approval from the US would be a symbolic and very public win for Roy Hill, it is not considered the most influential lender to the project, with the cluster of Asian banks dominating negotiations.